Guide on legal checks before property purchase

Recently, in an Allahabad High Court ruling, the real estate giant Supertech was asked to demolish its 40-storey tower in Noida.  However the company will move the Supreme Court against the order claiming that all necessary approvals from appropriate authorities were in place. The tower was constructed against the mandatory building rules. While the permitted FAR should be 3.5, the builder followed only 2.75 FAR rendering the construction illegal.

In the current real estate scenario, most home buyers face litigations over their newly purchased apartments. It is therefore crucial to check if the property is legally clear before booking it. Even if it is a branded project by a reputed developer, inspection of the legal documents and construction approvals through legal consultants is becoming essential.

Besides property related litigations, such construction issues add to the load of home buyers who have purchased the property on loan since they end up paying EMIs and rentals till the construction is free from litigation. Most residential project cases running in courts stretch for years and even if the judgement is in favor of the home buyers, the builders will appeal again leading to a never-ending wait for the possession.

We present here, a quick guide to a litigation free real estate transaction. Examine these factors before purchasing a property:

Verification of Title Deed & Khata

Ensure that the Title Deed from the seller is clear from any encumbrance. The records related to the title deed of the property can be searched at the sub registrar’s office. The report will contain the owner of the property and the related changes in the title. Khata is a legal document that supports the title which will have an entry of the present owner and it can be verified with the local municipal records. Check whether the Khata is changed in the present owner’s name as it is necessary to obtain home loan, electricity approvals etc.

Project plan examination

In case of under construction projects, inspect whether the building plan is sanctioned & approved by appropriate authorities. This can be done by comparing the sanctioned plan with the actual built up area of the project to avoid buying property in an illegal construction. The layout approval can be verified with the concerned authorities. Examine the land survey report made at the time of buying the property to validate that there are no legal disputes over titles, boundaries etc.

Checking legal dues

To check whether the property has any legal dues, one can scrutinize the encumbrance certificate which is an evidence that the property is free from all legal dues and mortgages. If the property already has a registered society, then a no objection certificate (NOC) is also necessary to authenticate the legal status of the project.

Examine bank approvals

A simpler way to check whether the property is legally clear is to look at bank approvals. Banks approve only those properties which are legally clear and possess valid documents. Banks usually check the title clearance and all other important paper-work related to the project so one can rest assured that the property is fit to be purchased.

With legal issues concerning real estate developments increasing by the day, it is advisable to not only check the documents and the builder profile along with his previous construction track record but also take professional help if possible to perform thorough checks on legal clearances before booking a home.

Image Credits : DNA

Recently, Abbott India Ltd. has closed a deal of Rs 1,400 crore in Mumbai, where Abbott has bought 500,000 sq. ft. commercial space and it is one of the largest commercial real estate deal in present time, as per the real estate experts who are familiar with the real estate transaction. This deal is clear example that demand for commercial space in Mumbai is increasing and its IT companies, Pharma firms and Start-ups which are looking for commercial space.

Abbott India Ltd. which is one of the fastest growing pharmaceutical firm has brought the space for office at Godrej  BKC in Mumbai’s BKC  (Bandra Kurla Complex). The real estate market in Mumbai has seen a positive shift in last two years and when it comes to commercial property, so we can say that it has seen a pick-up over past year because demand for commercial space and office space from IT, pharmaceutical firms, multinational and start-ups has risen. However; it is well known fact in present the level of unsold inventories for residential market is risen for major markets in Mumbai and deal of Abbott has clearly reflects that there is little pick-up in commercial properties. According to real estate experts it was phenomenal deal because it was a  single-cheque transaction and its well-known fact that Pharmaceutical companies never prefer to spend this much money on property or real estate, especially at BKC where commercial property is expensive and where Banks and financial organizations prefer to set-up their headquarters, as per unknown sources who declined to be identified  because it was not a public deal.

However; according to another person, the deal had been clinched in the month of Sep 2015, and till now it was subject to approvals, whereas; Cushman & Wakefield, a global real estate consultancy was advisor to the deal, but Cushman & Wakefield has declined to comment on the deal. Apart from that an Abbott spokesperson also stated that we don’t have any comment to share on this matter. Godrej BKC  is about to come up with 19-storey commercial project in same region and it will be developed by Jet Airways (India) Ltd. and Godrej Properties Ltd (GPL). However; previously in 2011 Godrej Properties had acquired the construction and development rights from Jet Airways to build the property. And the spokesperson from Godrej Properties stated that he don’t want to comment on the matter. In past two to five years, BKC has emerged as one of the most prime commercial hubs in Mumbai and due to that the average price for commercial property at BKC region ranges between Rs.20,000 and Rs.34,000 per sq.ft., however; the rental rates go up to the Rs.270 per sq.ft. per month as per the estimation of JLL India which is property consulting firm. According to the Ashutosh Limaye. who is research head at JLL India, “Now Multinational firms are looking for long term business in India and because of that they are increasingly choosing BKC to set up their head offices”.

According to real estate experts this is great time to sign up the real estate deals in Mumbai because property prices and rent will rise soon because of huge demand of commercial and residential space. In present, Abbott deal is one of the largest commercial real estate transactions in India. However; in 2012, Cipla Ltd which is another fastest growing pharmaceutical firm in India has brought 1.30 lakh sq.ft. at Peninsula Business Park in Lower Parel for about Rs.985 crore. From last one year the demand for commercial spaces in Mumbai is growing. As per the latest reports of property advisory CBRE, the uptake for commercial space has rose by 70 per cent in the second quarter of 2015 in comparison of previous quarter, which was led by BFSI (Banking, financial and insurance services) sector.